Senior Estate Planner Mike Repak explains how establishing an end-of-life health care plan can protect the value of your legacy.
Today, Americans are paying more out-of-pocket health care expenses than ever before. For example, an estimated one-quarter of traditional Medicare spending for health-care services goes to providing Medicare recipients with end-of-life care (the care a terminally ill patient receives during advanced stages of illness).1
Major expenses can be incurred at this stage of life by failing to express preferences on the type of care wanted—or more importantly not wanted—as end-of-life approaches.
Research finds that most adults surveyed (90%) say that, if suffering from terminal illness, they’d prefer to receive end-of-life care in their own homes. Yet data shows that only about a third of Medicare beneficiaries (age 65 and older) actually died at home.2
Putting a plan in place can help you have the type of care you prefer, with consideration for your loved ones and your legacy.
Here are some things to consider:
Long-term care insurance
Given the tremendous costs of end-of-life care, many retirees consider incorporating some kind of long-term-care insurance in their overall portfolio.
Traditional long-term care insurance provides for a maximum daily benefit, usually after an exclusionary period, to pay for nursing home or in-home nursing care, under circumstances where you can no longer perform certain activities of daily life alone.
Depending on your situation, you could consider adding an inflation rider to manage the policy’s purchasing power over time. It’s also possible to purchase either an annuity or life-insurance policy to potentially help cover long-term-care costs if it becomes necessary.
It’s imperative to be thorough in your planning. Otherwise, you may end up in a place you don’t want to be or get treatment you wouldn’t choose if you were able. Some sound planning prior to this stage can help reduce out-of-pocket, end-of-life costs significantly.
Documents to assure your wishes are known — And followed — Later in life
While we are not in the business of providing legal advice, having a few documents in place will help assure your intentions will be followed.
One of the best tools in end-of-life planning is a living will, also called a medical directive or advance care directive. This document can instruct your family and caregivers about the types of treatment you want or prefer not to have. A type of advance
directive, living wills become effective if and when your primary physician decides you can no longer make your own health care decisions. It can be a stand-alone document, or oftentimes can be incorporated into a health care power of attorney (also
known as a durable power of attorney for health care). Please consult with your attorney for specific application to your situation.
Durable Power of Attorney for Health Care
A durable power of attorney for health care gives your named representative, or agent, the legal ability to make decisions on your behalf when you can’t because of illness or incapacity.
These documents usually have two parts. One typically takes effect immediately after signing and gives your agent the ability to access your health records under the HIPAA provisions. The second typically goes into effect if you become unable to make decisions. While drafting this document, you’ll need to make many decisions, including whether to donate organs for life-saving purposes or donate them to medical research. Please consult with your attorney for specific application to your situation.
Durable Power of Attorney (General)
A durable general power of attorney gives your agent (either the same person as the health care power of attorney or another individual) the ability to make legal decisions and handle all financial transactions for you, should you become unable to act
Your choice of agent is very important. You should feel comfortable sharing all of your financial information with this person.
In the absence of having a signed health care power of attorney, as well as a durable general power of attorney, your family may need to have a guardian appointed to make health care decisions (including end-of-life choices), pay your bills (including medical bills), file your tax returns, and make investment decisions.
Having a guardian appointed takes time, and can be expensive—and stressful for your loved ones.
Please consult with your attorney for specific application to your situation.
Many people are now planning and paying for their own funerals well before end-of-life.
This type of planning can get as detailed as choice of flowers and music, the service venue, and the family reception location.
Planning ahead this way allows your family to move through the process with minimal stress. They’ll also be under less pressure to make financial decisions that may differ from your wishes.
1. Gerald F. Riley and James D. Lubitz, “Long-Term Trends in Medicare Payments in the Last Year of Life,” Health Serv Res 2010;45 (2): 565-76; Christopher Hogan et al., “Medicare Beneficiaries’ Costs of Care In The Last Year of Life,” Health Aff (Millwood) 2001; 20(4):188-95.
2. Approaching Death: Improving Care at the End of Life, Institute of Medicine, 1997; Joan M. Teno et al., “Change in End-of-Life Care for Medicare Beneficiaries,” JAMA 2013;309(5):470-77.
Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Janney makes no representation that an individual will obtain gains or losses similar to those illustrated. The concepts illustrated here have legal, accounting and tax implications.